retailingMBA IV Semester [MBA MK 03]

Dr. Rahul Pratap Singh Kaurav

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What is merchandising?

The functions of merchandising is an integral part of retailing and is also one of the most challenging functions as retailer often say ‘good well bought are half sold’.

The biggest challenge in merchandising are: Having the right product, In the right quantity, Available at right place, At the right time, And with the right price.

Types of merchandise products - I

Basic Products These products are bought and consumed in a routine manner. These goods are usually purchased for their functional values. Generally, low priced. Available at many locations. Generally includes Staple goods, Convenience goods, Emergency

goods, and some Impulse goods also.

Types of merchandise products - II

Specialty Product These needs special purchase efforts by the customers. Having certain unique characteristics. Usually have some brand identification. These items are available only at selected purchase locations.

Types of merchandise products - III

Shopping Products These are bought less frequently. The customers tend to gather more information about the product. These are available at fewer purchase locations. These compared for quality, suitability, price and style.

Types of merchandise products - IV

Unsought Products These are new innovative products. These products are not readily acceptable in market. These items require much advertising and personal selling to gain

acceptance.

Process of merchandise procurement

Identification of customer needs and product specification.

Specify demand.

Searching and deciding about product suppliers.

Evaluation of alternatives.

Specifying the orders.

Evaluating the performance of product and supplier.

Example: Merchandise Hierarchy

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Factors affecting pricing - I

Macro environment factor Dynamics of demand and supply Price of key products Market structure and nature of competition Govt. policies Increased consumer awareness Seller concentration ratio Macro environment

Factors

Supplier-Retailer factor

Retail Price

Factors affecting pricing - II

Supplier-Retailer factor Business strategy of retailer Type of merchandise and seasonal factors Retail format and customers services Type of buyer Quantity of purchase Quality functional feature and packaging of products Quality certification

BIS, BEE, AGMARK, FDA etc. Manufacturer suggested retail prices

Macro environment Factors

Supplier-Retailer factor

Retail Price

Approaches of pricing - I

Cost-based pricing

Competition-based pricing

Psychological pricing

Discount pricing

Market penetration pricing

EDLP (Every day low pricing)

Value based pricing

Dynamic pricing

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The Concept Of Internationalisation

Retail Internationalisation-the process of a retailer transferring its retail operations, concept, management expertise, technology and/ or buying function across national borders

Multinational Retailers-those firms that are in some way, responsive to the headquarters located outside the country, or colony, in which retail sales are made

International Retail Operations-the operation, by a single firm, of shops, or other forms of retail distribution, in more than one country

Treadgold’s Typology Of International Retailers

Cautious Internationalists

Emboldened Internationalists

Aggressive Internationalists

World Powers

Parameters of International retailing & kinds of International retailers

International Global Transnational Multinational

Geographic scope

Cultural spread

Cultural orientation

Marketing

Management

One continent

One cultural zone

Ethnocentric

Expansion of home format or international alliances

Domestic HQ

Two or more continents

Two or more cultural zones

Mixed

Minimal adaptationHomogeneous Markets

Centralised control

One or more continents

Two or more cultural zones

Geocentric

Medium adaptationHeterogeneous Markets

Integrated network

One or more continents

Two or more cultural zones

Polycentric

Major adaptation or diverse formatsHeterogeneous markets

Independent units

Determining The Market Of Entry

Proximity to the domestic market Similarity in culture The size of the market The laws and the regulations of the land Trade relations between the countries Strength of the local players in the market

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Which Market To Enter- Retail Decisions?

Domestic/ Export Market Expansion?

Which Markets?

Which Market Entry Strategy?

Operationalising the Market Strategy?

Different Modes To Enter A Foreign Market For Retail

Supply of goods Franchising Joint Ventures Acquisition of stake (major/minor) in existing retailers

Reasons for failure in International Retail

Incomplete understanding of- the consumers constraints of local environment cultural distinctions

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INTRODUCTION

According to Dawson (1994), ‘International Retail operations may be defined as the operation, by a single firm or alliance, of shops, or other forms of retail distribution, in more than one country’. It focuses on the operation of outlets of single retail organizations in multiple countries.

FOUR ROUTES TO SEEK PROFITS

Expanding the product rangeDiversifying into new formatsIncreasing the range and value of private level brands

to increase profitabilityInternationalization

INTERNATIONAL RETAIL STRUCTURE

The development and sophistication of the retail industry in a country can be measured by an analysis of the prevailing retail structure there.

In developed markets, a large share of retail activity is carried on by a relatively few enterprises. Large retailers have the ability to invest in sophisticated technology to improve supply chain process.

PROCESS OF INTERNATIONALIZATION

Retailers seeking expansion generally have these options:

Penetrate the existing markets where it is already operating

Expand into new product linesMaintain its existing product lineExpand simultaneously into new product areas and

markets.

BORROWED AND INNOVATIVE CONCEPT

According to Alexander (1997):Establishment Domestic expansionSaturationDiversificationinternationalization

PATTERNS FOR INTERNATIONAL EXPANSION

On the basis of size and retail structure of domestic economy Alexander and Doherty (2004) has identified certain patterns:

Global market of origin to global market of destinationRegional market of origin to regional market of

destinationRestricted markets of origin to restricted markets of

destinationDormant markets

CHALLENGES IN INTERNATIONALIZATION

There are certain challenges for global retailers:The reliance on domestic sourcing at times creates

problems for mass market retailers when they globalize.

There is a possibility of creating confusion while positioning in different countries.

They may face the problem of mismatch of culture, weak financial position, etc.

DETERMINANTS

Regulatory, economic, social and cultural environment have an impact on international development. RegulatoryEconomicalSocialCultural

Regulatory

NAFTA, ASEAN,etc.

Economical Demographic

factors Market growth Economic output

Social

These characteristics are the products of economic and cultural influences. It is measured by the articrafts of everyday existence, the physical representation of economic wealth.

Cultural

It is the part of the conditioning that deals with nation, region, or group, language, etc .

MARKET SELECTION

Some key factors to be considered to select the markets:Per capita GDP of the countryPopulation sizeUrbanization: higher the urbanization , the greater the

attractiveness of the marketPolitical stabilityCultural factorsLabor relations in the country

MARKET ENTRY METHODS

Flagship storesOrganic growthMergers and acquisitionsJoint ventures FranchisingConcessionsExporting and wholesaling

INTERNATIONAL RETAIL DIVESTMENT

The process of selling off subsidiary business interests or investments. The key factors are:

Link between entry mode and divestment Market performanceCompetition in the international market Lack of strategic fit and re-focus on core businessMarket leader performanceDivestment as a consequence of acquisition International retail divestment